House T-Mobile/Sprint Hearings Expected to Have Antitrust Tilt

Communications Chairman Mike Doyle, D-Pa., predicted subcommittee members will focus on a range of deal-related telecom and antitrust topics during the Wednesday hearing. Holding separate hearings instead of the joint panel originally intended probably won't allow Communications to focus solely on telecom policy matters Wednesday, he said. “I would think that [House Antitrust] would have the benefit of knowing what questions have already been asked” and "then exploring them a little deeper” at the later meeting.

Antitrust will examine T-Mobile/Sprint's potential “impact on consumers, on consumer choice, on prices, on innovation, on jobs,” said Chairman David Cicilline, D-R.I. He hasn't “prejudged” whether the FCC and DOJ's Antitrust Division should approve, but “there is considerable concern” about its effect on the U.S. wireless market. There's inherently going to be “less competition” in an industry when fewer companies are in competition, Cicilline said. Doyle previously declared himself undecided. Rep. Anna Eshoo, D-Calif., is among supporters (see 1901300044).

Commerce Consumer Protection Subcommittee ranking member Richard Blumenthal, D-Conn., and eight other senators, including several 2020 presidential contenders on Tuesday wrote the FCC and DOJ Antitrust in opposition to T-Mobile/Sprint. The others were: Senate Judiciary Antitrust Subcommittee ranking member Amy Klobuchar, D-Minn.; Cory Booker, D-N.J.; Sherrod Brown, D-Ohio; Kirsten Gillibrand, D-N.Y.; Ed Markey, D-Mass.; Bernie Sanders, I-Vt.; Elizabeth Warren, D-Mass.; and Tom Udall, D-N.M. Booker, Gillibrand, Klobuchar and Warren have declared their candidacy for the 2020 Democratic presidential nomination. Brown and Sanders have expressed interest in joining the race.

“This merger will turn the clock back, returning Americans to the dark days of heavily consolidated markets and less competition, with all of the resulting harms,” the senators wrote FCC Chairman Ajit Pai and DOJ Antitrust Chief Makan Delrahim. The deal would be “a sharp blow to competition in the telecommunications industry,” with the resulting three top wireless carriers then having “every incentive to shut the door on new members, happily divide the market, and collect ever-rising monthly rents from wireless subscribers with few real alternatives.”

Anti-Merger Rhetoric?

House aides told us the antitrust elements of T-Mobile/Sprint are unlikely to be reserved specifically for discussion at the House Antitrust hearing. The hearings will be the House's first telecom-centric deal hearings since Democrats lost control of the chamber during the 2010 election, so Democrats on both subcommittees will likely use this “as an opportunity to point out how in their view mergers in this space have failed consumers in recent years,” said one communications sector lobbyist who follows that party.

A House Communications Democratic memo is highlighting antitrust issues, including the transaction's potential impact on consumer prices, the low-income subscriber market and potential job losses.

It “will be interesting to see if there is a renewed focus on horizontal mergers generally” during the hearings, said American Action Forum Director-Technology and Innovation Policy Will Rinehart. “This is one of those instances where the changing conversation that's been happening over the last year could really come to a head.” Democrats' “rhetoric” on that issue will be an important measure of how the mood on Capitol Hill may have shifted on antitrust matters following the party's shift back to majority House control, he said.

Communications Democrats' memo highlights a handful of telecom issues, including the carriers' longstanding argument “that their combined spectrum holdings will allow New T-Mobile to compete with other larger wireless companies,” including on 5G buildout (see 1804290001). The deal would mean the combined carrier potentially gets “greater power” in the wholesale market, the memo said. Rinehart highlighted 5G as another likely top discussion topic, especially the transaction's potential to aid in buildouts “in sparse areas.”

Testimony

Written testimony from Sprint Executive Chairman Marcelo Claure and T-Mobile CEO John Legere extensively details the carriers' 5G-centric arguments. They invoked lawmakers' simmering concerns about U.S. ability to retain a lead in deploying and developing the technology amid stiff competition from Chinese firms Huawei and ZTE. Information Technology and Innovation Foundation Broadband and Spectrum Policy Director Doug Brake backs the transaction in his testimony. Three other witnesses -- Rural Wireless Association General Counsel Carri Bennet, Public Knowledge Senior Policy Counsel Phillip Berenbroick and Communications Workers of America President Chris Shelton -- criticize it.

Some opponents of the deal claimed it “will allow Huawei and ZTE into U.S. networks,” which is “false,” Legere wrote. “We do not use Huawei or ZTE network equipment in any area of our network. Period. And we will never use it in our 5G network.” The combined carrier “will buy network equipment only from trusted network equipment suppliers with a strong security track record" in the U.S., he said. “By accelerating deployment of true, robust nationwide 5G, New T-Mobile will provide a critical lift to these trusted network equipment vendors -- Huawei’s competitors -- protecting the 5G supply chain for the United States and our allies.”

Sprint “as a standalone company cannot fully seize the tremendous opportunity that 5G creates, much less match what a merged Sprint and T-Mobile could do together,” Claure wrote. The carrier's “limited low-band spectrum cannot provide a basis for launching a ubiquitous coverage layer for 5G, and building ubiquitous nationwide 5G coverage using only Sprint’s 2.5 GHz spectrum would be impractical and economically infeasible.” That spectrum “will deliver very high speeds and support substantial capacity where we are able to deploy it,” but “it would not provide a blanket of coverage outside of major metropolitan and suburban areas,” he wrote.

Brake cites the transaction's 5G implications, and pushes back against opponents' argument “that the government must preserve four operators.” This view “is mistaken,” ignoring the rapidly differentiating business models in and adjacent to wireless services,” he wrote. “Raw connectivity is increasingly commodified and wireless companies are looking to new revenue streams -- most notably home wireless broadband; Internet of things (IoT) applications, including connected vehicles and drones; over-the-top video, and advertising -- to recoup large ongoing investments.”

“This merger as currently structured would kill American jobs, lower wages, and raise prices to enrich two foreign companies, Deutsche Telekom [T-Mobile's owner] from Germany and Softbank [Sprint's principal owner] from Japan,” Shelton wrote. “Antitrust laws and the requirements under the Communications Act have not changed. Congress has not repealed them. ... A merger that was presumptively unlawful in 2015 or 2016 is presumptively unlawful today.” Past deals involving Sprint or T-Mobile also faltered.

RWA's Bennet invokes horizontal merger concerns, saying the transaction “will force rural Americans to pay more money for wireless services.” It will “undermine the system of roaming that is a key component of telecommunications and broadband access in rural communities and degrade service quality.” The combination “will do nothing to help rural Americans or those traveling in rural America, but will do much to hurt them,” she wrote. CWA and RWA Monday cited aftereffects of the completed T-Mobile/Iowa Wireless (iWireless) transaction to illustrate what they say will be negative effects on rural wireless customers.

“The companies’ economic models have come under substantial attack, and have even been shown to undermine the company's own case -- showing the merger will lead to higher prices for consumers,” PK's Berenbroick wrote. “At best, the companies have a vision where, post-merger, New T-Mobile would sell more profitable plans to more affluent customers.”